Correlation Between Prudential Financial and First Solar
Can any of the company-specific risk be diversified away by investing in both Prudential Financial and First Solar at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Prudential Financial and First Solar into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prudential Financial and First Solar, you can compare the effects of market volatilities on Prudential Financial and First Solar and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Prudential Financial with a short position of First Solar. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prudential Financial and First Solar.
Diversification Opportunities for Prudential Financial and First Solar
-0.37 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Prudential and First is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Prudential Financial and First Solar in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Solar and Prudential Financial is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Prudential Financial are associated (or correlated) with First Solar. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Solar has no effect on the direction of Prudential Financial i.e., Prudential Financial and First Solar go up and down completely randomly.
Pair Corralation between Prudential Financial and First Solar
Assuming the 90 days trading horizon Prudential Financial is expected to generate 6.1 times less return on investment than First Solar. But when comparing it to its historical volatility, Prudential Financial is 9.89 times less risky than First Solar. It trades about 0.21 of its potential returns per unit of risk. First Solar is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest 377,790 in First Solar on September 13, 2024 and sell it today you would earn a total of 27,110 from holding First Solar or generate 7.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Prudential Financial vs. First Solar
Performance |
| Timeline |
| Prudential Financial |
| First Solar |
Prudential Financial and First Solar Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prudential Financial and First Solar
The main advantage of trading using opposite Prudential Financial and First Solar positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prudential Financial position performs unexpectedly, First Solar can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in First Solar will offset losses from the drop in First Solar's long position.| Prudential Financial vs. Taiwan Semiconductor Manufacturing | Prudential Financial vs. Cognizant Technology Solutions | Prudential Financial vs. McEwen Mining | Prudential Financial vs. Southern Copper |
| First Solar vs. Grupo Sports World | First Solar vs. Southwest Airlines | First Solar vs. GMxico Transportes SAB | First Solar vs. Costco Wholesale |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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